A Blueprint for the Development of the Resources on the Demand Side

“You cannot go on having absurd amounts of wealth when other people have problems of survival. If you can bring an end to poverty, at least from an economic point of view, you can have a more livable situation between very rich people and very poor people, very rich countries and very poor countries. That's our basic ingredient for peace."

—Muhammad Yunus, 2006 Nobel Price Winner

Reference: A Blueprint for Avoiding Blackouts, by Mike Gordon, President and Founder, ConsumerPowerline.

To stress the importance of a very timely article, two days ago, the Demand Response and Advanced Metering (DRAM) Coalition issued comments on the Annual Report issued by NERC in Washington. The DRAM Coalition said that “one of the top recommendations of the Report is for more demand response to be deployed, whereby customers would be provided with price signals or incentives to reduce or shift their electricity usage during peak demand periods.”

From a more general perspective, Mr. Gordon’s article is describing one of the aspects of the development of the resources on the demand side to partially replace generation, transmission and distribution reserves required to avoid loss of load. The bulk of the electric power “energy” component will be provided for quite a while with base load central station power plants and transported to end users. The emphasis is in the distinction between energy and supply security. Energy efficiency (and non-firm distributed generation) replaces energy; demand response (and firm distributed generation)– demand side risk management - replaces generation and transportation (T&D) supply side - security reserves - risk management.

The integrated development of the resources of the supply side and the resources of the demand side - energy efficiency, demand response, distributed generation, energy storage - will lead to the End-State of the power industry. Right now this is being done on a piece meal approach instead of with an integrated resource planning (IRP) approach in most locations. See the article Divorcing Electricity Sales from Profits Creates Win-Win for Utilities and Customers for such an approach.

The author recognizes an important trend of what is happening when he says: “…even the smallest residential customers are practicing their own version of demand response, and seizing more control of their usage and energy dollars in the process…” The key to the statement is that small customers that require less than average supply security will be able to pocket saving that they are forced to pay under average rates, while helping customers with above average supply security need – businesses - to keep their processes uninterrupted. The result is the opportunity of a pricing system that is more efficient in which the regulator is not longer needed. This what I have been writing about Electricity Without Price Controls, whereby the development of the market at the Bottom of the Pyramid can be developed.

A Blueprint for the Development of the Resources on the Demand Side can be found in my comments under the same article Divorcing Electricity Sales from Profits Creates Win-Win for Utilities and Customers. There is an urgent need to recognize that a complete and fully functional electricity market, based on a coherent reform is required, as I have been commenting on EnergyPulse since November 2005, when An Alternative Business Case for Demand Response was posted.